Why Is Mercedes-Benz Building a $500,000 Car?

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The new Mercedes-Maybach Pullman, shown with the old Mercedes-Benz 600 Pullman that inspired the new model's name, will have a starting price just over $500,000. Source: Mercedes-Benz.

Mercedes-Benz announced this week that it is launching a new top-of-the-line model -- and it'll be priced in the automotive stratosphere.

The new Mercedes-Maybach Pullman is a supersize, super-opulent luxury sedan that will be launched officially at next month's Geneva International Motor Show.

The car is over 21 feet long, is loaded with advanced safety and luxury features, and comes with a big price tag: about $500,000 for starters, with options including full armor plating that could doubleits starting price.

Why is Mercedes building this thing?

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Why build a $500,000 super-sedan?
Simply put, because Mercedes' parent company Daimler thinks it will sell. But it's a little more complicated than that.

It's not necessarily obvious to those of us who buy and drive mainstream cars and trucks, but a big battle is brewing at the very top end of the luxury car market.

For years, there was a clear separation between the German luxury brands -- Mercedes, BMW , and Audi -- and the luxury-sedan brands that have long dwelt one big step up from there, namely Rolls-Royce and Bentley.

The Mercedes-Maybach Pullman is intended to be chauffeur-driven: The back seats are the focus. Source: Mercedes-Benz.

But in recent years that line has started to blur. Rolls-Royce and Bentley have expanded a bit downmarket, with the idea of giving Mercedes and BMW customers a rung on the luxury-car ladder that was a bit more within reach. At the same time, economic booms in China and elsewhere were creating many new potential customers for $200,000-plus luxury sedans.

This resulted in more profitable sales for the little British brands while the Germans lost some of their biggest-spending customers. That's a problem: High-end cars such as the S-Class are among Mercedes' -- and Daimler's --most profitable products.

Why Mercedes wants to compete with Rolls and Bentley, as well as BMW and Audi
Losing well-heeled customers wasn't necessarily a problem for BMW and Volkswagen, Audi's corporate parent. That's because, often, the customers weren't really being lost: BMW now owns Rolls-Royce, and VW owns Bentley. For them, it's all in the family.

But Daimler doesn't have a genteel bespoke super-luxury brand, so it has been missing out.

Daimler tried to launch a brand above Mercedes several years ago. That brand, called Maybach, had a hard time getting traction. There were two big reasons for that. First, while "Maybach" was a brand taken from long-ago automotive history, it didn't have the decades of resonance that rivals Rolls-Royce and Bentley had built up.

Second, and perhaps more important, luxury buyers saw the Maybachs for what they were: stretched and tarted-up versions of Mercedes' big S-Class. They didn't sell well, and Daimler abandoned the venture.

But it didn't abandon the idea. Now it's back -- still holding on to the Maybach name, but with a Mercedes-Benz badge on the nose instead.

Can Mercedes really pull off a $500,000 car?
Daimler is gambling the Mercedes-Benz brand has enough cachet to play in this rarefied market. As long as the cars deliver an experience that is clearly a step (or two, or three) above an S-Class, it's probably right.

But it might have more company in this space before long. Last year, BMW showed off a concept car that was thought to be a preview of a future 9 Series super-sedan.

Last year's BMW Future Luxury Vision concept car is thought to be a preview of a possible 9 Series. Source: BMW Group.

It's not quite as over-the-top as the Pullman, and it's not as obviously intended to be driven by a chauffeur.

But as the world's pool of wealthy car buyers expands -- and as it continues to find "ordinary" BMWs and Mercedes-Benzes a little too ordinary -- we're likely to see more automakers trying to enter this extremely profitable little market segment. Stay tuned.

The article Why Is Mercedes-Benz Building a $500,000 Car? originally appeared on Fool.com.

John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.